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In 2010, the IT industry returned to the business of growing while acquisition activity sprang back into life

When Information Age cast its eyes over the IT industry’s annual performance at the end of 2009, it was an unsurprisingly grim picture. Businesses had slammed the brakes on IT spending in the wake of the credit crunch, and suppliers were lucky if their business grew at all, let alone in the 10% to 15% range that had defined the pace of the sector for the prior decade.

And while caution – and even pessimism – lingered on in 2010, it was a much better year for the IT industry.

Revenue growth rates, which in 2010 compared back to one of the industry’s darkest years, improved dramatically. The Information Age Index, which averages the revenue growth rate among the IT industry’s largest suppliers, went from -6.6% in January 2010 to 13.6% in December, an increase of 20 percentage points.

The industry is of course dominated by a handful of very large suppliers, and in 2010 many of these bounced back dramatically. Network equipment vendor Cisco, for example, saw revenues for the calendar year grow 19% to $41.6 billion, while chipmaker Intel’s sales shot up 24% to $43.6 billion.

Computer maker Dell enjoyed a similar rate of growth – revenues increased 18% to $60.7 billion – although it was helped along considerably by a number of recent acquisitions. Similarly, Oracle’s 38% revenue leap to $31.9 billion had more than a little to do with its acquisition of Sun Microsystems at the start of the year.

The sector’s two largest companies, Hewlett-Packard and IBM, whose breadth of offerings means they arguably represent the industry as a whole more than any others, were more sedate in their growth. HP grew sales by 10% year-on-year to $126.0 billion, while IBM grew by just 4% to $99.9 billion.

Larger companies whose 2010 revenue growth was decidedly underwhelming include security and storage giant Symantec, whose sales rose by 2% to $60.5 billion (an interesting data point for anyone still pondering the wisdom of its 2004 merger with Veritas) and systems integrator Unisys. Once one of the industry’s leading lights, Unisys’s star has faded considerably in recent years, and in 2010 its revenues contracted by 8% to $40.6 billion.

The fastest-growing segment of the IT sector in 2010 was ‘Development and integration’, as it had been in 2009. Companies in the segment averaged revenue growth rates of 24% for the year.

This may suggest that businesses invested in developing, integrating and modernising their existing software during 2010, although it may also be a result of the fact that the segment contains some of the smallest companies that Information Age tracks, meaning rapid rates of revenue growth are more likely. For example, the segment’s fastest-growing company, Unify Corp, is one of the smallest included in this analysis – it grew sales by 63% to $39.0 million.

The storage segment grew well, with storage suppliers averaging 16% growth, but this might have been higher had it not been for the widespread acquisition of independent storage vendors by IT giants such as HP and Dell. Information Age’s Effective IT Survey found last month that there was a sharp rise in storage virtualisation technology adoption in 2010.

Two companies in the storage segment are worthy of mention. One is Xyratex, a little-known provider of networked storage systems and the second-fastest-growing company in the IT industry in 2010. Its sales rocketed 85% to $1.6 billion during the year.

The other is Overland Storage. Despite the fact that it operates in the same technology space as Xyratex, Overland’s revenues fell the second most in the entire industry – by 19% to $62 million. All network-attached storage providers are not created equal, it seems.

The slowest-growing segment was IT services, with companies averaging revenue growth of 11%. This is by no means a sluggish pace, but that average would have been much lower had it not been for the Indian offshore outsourcers, famed for their rapid rates of growth.

It was the second-tier Indian suppliers that really shone through in 2010. Cognizant (headquartered in the US, but undeniably an Indian company) grew 40% to $4.6 billion, and HCL Technologies grew 26% to $3.1 billion. iGate, the segment’s fastest-growing company and another US/India hybrid, saw sales jump 45% to $280.6 million.

Fast-growing British companies included chip designer ARM Holdings, whose smartphone chip designs helped it grow revenues by 30% to £406.6 million

($631.3 million) for the year, and US-listed search specialist Autonomy, whose sales grew 18% to $871 million. Sage, the UK’s largest software company, saw revenues decline for the year, down 1% to £1.4 billion ($2.2 billion).

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